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Multi-Stage Contests with Stochastic Ability

  • Konrad, Kia A.
  • Kovenock, Dan

We consider the properties of perfectly discriminating contests in which players’ abilities are stochastic, but become common knowledge before efforts are expended. Players whose expected ability is lower than that of their rivals may still earn a positive expected payoff from participating in the contest, which may explain why they participate. We also show that an increase in the dispersion of a player’s own ability generally benefits this player. It may benefit or harm his rival, but cannot benefit the rival more than it benefits himself. We also explore the role of stochastic ability for sequential contests with the same opponent (multi-battle contests) and with varying opponents (elimination tournaments) and show that it reduces the strong discouragement effects and hold-up problems that may otherwise emerge in such games. High own ability dispersion selects such players into the contest and favors them in elimination contests.

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Paper provided by Purdue University, Department of Economics in its series Purdue University Economics Working Papers with number 1192.

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Length: 27 pages
Date of creation: Aug 2006
Date of revision:
Handle: RePEc:pur:prukra:1192
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  1. Baye, M.R. & Kovenock, D. & De Vries, C.G., 1991. "The All-Pay Auction With Complete Information," Purdue University Economics Working Papers 1007, Purdue University, Department of Economics.
  2. Michelle R Garfinkel & Stergios Skaperdas, 2001. "Conflict Without Misperceptions or Incomplete Information: How the Future Matters," Levine's Working Paper Archive 563824000000000011, David K. Levine.
  3. Wärneryd, Karl, 1997. "Distributional Conflict and Jurisdictional Organization," SSE/EFI Working Paper Series in Economics and Finance 173, Stockholm School of Economics.
  4. Stefan Szymanski, 2003. "The Economic Design of Sporting Contests," Journal of Economic Literature, American Economic Association, vol. 41(4), pages 1137-1187, December.
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  9. Christian Groh & Benny Moldovanu & Aner Sela & Uwe Sunde, 2012. "Optimal seedings in elimination tournaments," Economic Theory, Springer, vol. 49(1), pages 59-80, January.
  10. Konrad, Kai A. & Kovenock, Dan, 2009. "Multi-battle contests," Munich Reprints in Economics 22084, University of Munich, Department of Economics.
  11. Kai A. Konrad & Dan Kovenock, 2005. "Equilibrium and Efficiency in the Tug-of-War," CESifo Working Paper Series 1564, CESifo Group Munich.
  12. Rosen, Sherwin, 1986. "Prizes and Incentives in Elimination Tournaments," American Economic Review, American Economic Association, vol. 76(4), pages 701-15, September.
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  14. Arye L. Hillman & John G. Riley, 1987. "Politically Contestable Rents and Transfers," UCLA Economics Working Papers 452, UCLA Department of Economics.
  15. Strumpf, Koleman S, 2002. " Strategic Competition in Sequential Election Contests," Public Choice, Springer, vol. 111(3-4), pages 377-97, June.
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  17. Muller, Holger M & Warneryd, Karl, 2001. "Inside versus Outside Ownership: A Political Theory of the Firm," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 527-41, Autumn.
  18. Abrevaya, Jason, 2002. "Ladder tournaments and underdogs: lessons from professional bowling," Journal of Economic Behavior & Organization, Elsevier, vol. 47(1), pages 87-101, January.
  19. Dixit, Avinash K, 1987. "Strategic Behavior in Contests," American Economic Review, American Economic Association, vol. 77(5), pages 891-98, December.
  20. Klumpp, Tilman & Polborn, Mattias K., 2006. "Primaries and the New Hampshire Effect," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1073-1114, August.
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